Bank Reconciliation Explained: Why It Matters and How to Do It

If your books aren't reconciled, you can't fully trust them. Bank reconciliation is the process of comparing your bookkeeping records with your bank statement to make sure they match.

Why reconciliation matters

Bank feeds in accounting software are helpful, but they aren't perfect. Without reconciliation, you can easily end up with:

• Duplicate transactions (imported twice, or entered manually and imported)
• Missing transactions (a broken bank connection, cash deposits)
• Wrong amounts or transactions in the wrong account
• Bank errors or fraud you'd otherwise never notice

Unreconciled books lead to wrong profit numbers, which lead to wrong tax returns.

Step-by-step reconciliation

1. Get your bank statement

Download the statement for the month you're reconciling.

2. Start with the right beginning balance

Your books' beginning balance should match the statement's beginning balance. If it doesn't, a prior month was changed or never reconciled, and that needs fixing first.

3. Match every transaction

In your accounting software's reconcile tool, check off each deposit and withdrawal that appears on the statement.

4. Look at what's left

Unmatched items usually fall into a few categories:

• Timing differences: checks you wrote that haven't cleared yet (normal)
• Missing entries: bank fees, interest or transactions that never imported
• Duplicates: the same transaction recorded twice
• Errors: wrong amounts or wrong accounts

5. Fix the differences

Add missing items, delete duplicates and correct errors until the difference is zero.

6. Finish and save the report

Complete the reconciliation and keep the report. It's valuable documentation if you're ever audited.

Reconcile more than your bank

Apply the same process to:

• Business credit cards
• Savings accounts
• Payment platforms (PayPal, Square, Stripe, Venmo business)
• Loans, using lender statements

How often?

Monthly, as soon as statements are available. Reconciling twelve months at year-end is far harder, because finding a small error from March in December takes much longer.

Red flags to watch for

• A reconciled balance that changes later (someone edited a reconciled transaction)
• Large "opening balance equity" entries
• Recurring small differences that get "forced" to balance

The bottom line

Reconciliation is the quality check that makes your books reliable. Do it monthly, for every account, and fix differences right away.

---

Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.